Forum Archive Index - March 2002

["Dick O'Connor" <callme_nz@hotmail.com>]

Hugh, the other day you referred to the AIA result which was very good.

On Friday one could have bought say 500 shares at $4.14 each, including 
brokerage. The company is currently paying a dividend of about 12c a year, 
giving a net yield of a tick under 2.9%.

Now, lets look what could happen to the dividend in future years if we 
accepted that AIA could grow its dividend by say 10% a year.

The 12c in 5 years would be 19c
           10 yrs           31c
           20 yrs           80c
           30 yrs           209c

We are told the two big enemies of long-term investing are tax and 
inflation. The dividend imputations here take care of the tax for most 
people. But we are told inflation has an even bigger effect even where tax 
has to be paid. How do you go about making a reasonable stab at what damage 
inflation might do to the figures above for 10, or 20 ,or 30 years.

I was finding it pretty slow going working it out year by year when it 
suddenly occurred to me we have the best economist right here on site. Is 
there a quick way of doing a calculation and how do you go about it? Regs


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